Unit – IV: Payment of Tax

1. Payment of Tax:

• Regular Payment:

  • Taxpayers are required to make regular payments of Goods and Services Tax (GST) based on the applicable tax rates for their supplies.

• Due Dates:

  • GST payments are typically made on a monthly or quarterly basis, depending on the turnover of the taxpayer.

• Electronic Mode:

  • Payments are made electronically through the GST portal, ensuring transparency and efficiency.

• Utilization of Input Tax Credit:

  • Taxpayers can utilize the input tax credit available to them while making the payment of GST.

• Interest on Late Payment:

  • Late payment of GST attracts interest, and it is essential for taxpayers to adhere to the prescribed timelines.

2. Procedure to Pay GST:

• Login to GST Portal:

  • Taxpayers need to log in to the GST portal using their credentials.

• Access the Payment Section:

  • Navigate to the payment section on the portal.

• Select the Payment Mode:

  • Choose the appropriate mode of payment, which can include electronic funds transfer, credit/debit card, or other approved methods.

• Fill in Payment Details:

  • Enter the required details, including the amount to be paid, the tax heads, and any applicable interest or late fees.

• Generate Challan:

  • Generate a challan with the system-generated unique identification number.

• Make the Payment:

  • Use the challan to make the payment through the selected payment mode.

• Confirmation and Receipt:

  • Receive confirmation and a receipt for the payment made.

• Recordkeeping:

  • Maintain records of the payment transaction for future reference and compliance.

3. Tax Deducted at Source (TDS):

• Meaning:

  • Tax Deducted at Source (TDS) is a system where the recipient deducts tax at a specified rate before making payments to the supplier.

• Benefits:

  1. Ensures Regular Revenue Flow:

     • TDS ensures a regular flow of revenue to the government by deducting tax at the source of income.

  2. Reduces Tax Evasion:

     • It helps in reducing tax evasion by making sure that tax is deducted before the payment is made.

  3. Simplifies Tax Collection:

     • Simplifies the process of tax collection by distributing the responsibility of tax deduction to various entities.

  4. Encourages Compliance:

     • Encourages compliance as it ensures that taxpayers are diligent in deducting and depositing the deducted tax.

  5. Promotes Transparency:

     • Enhances transparency in financial transactions, making it easier for authorities to track tax liabilities.

• Limitations:

  1. Complexity for Small Businesses:

     • TDS compliance can be complex, especially for small businesses, due to the administrative burden.

  2. Cash Flow Issues for Deductees:

     • Deductees may face cash flow issues as TDS can result in an immediate reduction of funds.

  3. Administrative Burden on Deductors:

     • Deductors bear the administrative burden of deducting, depositing, and filing TDS returns.

  4. Possibility of Errors:

     • Errors in TDS computation or filing may lead to penalties for deductors.

  5. Mismatch in TDS Claims:

     • Mismatch in TDS claims and credits can result in reconciliation challenges for deductors and deductees.

4. Interest on Delayed Payment of Tax:

• Late Payment Interest Rate:

  • Interest is charged on delayed payment of tax at a specified rate, usually expressed as a percentage of the outstanding tax amount.

• Calculation Basis:

  • Interest is calculated from the due date of payment until the actual date of payment.

• Compounding Frequency:

  • Interest may be compounded on a monthly basis for each month or part thereof.

• Applicability:

  • Interest is applicable when there is a delay in the payment of GST, irrespective of the reason for the delay.

• Avoiding Interest:

  • Timely payment of GST helps taxpayers avoid interest charges, ensuring compliance with payment deadlines.

6. Tax Wrongly Collected and Paid to Central Government or State Government:

• Rectification Process:

  • If a taxpayer wrongly pays tax to the wrong jurisdiction (Central or State), they need to rectify the error.

• Adjustment in Subsequent Returns:

  • The taxpayer can adjust the wrongly paid tax in subsequent returns filed with the correct jurisdiction.

• Communication with Tax Authorities:

  • It is advisable to communicate the error to the tax authorities promptly, providing necessary documentation.

• Correct Payment to Respective Authority:

  • The taxpayer must ensure correct payment to the respective authority to avoid compliance issues.

• Interest and Penalties:

  • Any interest or penalties incurred due to the wrongful payment may need to be addressed through the appropriate legal channels.

7. Claim of Input Tax and Provisional Acceptance (Procedure):

• Claim of Input Tax:

  • Taxpayers can claim input tax credit on eligible inputs, capital goods, and input services used for business purposes.

• Verification and Validation:

  • Tax authorities may verify and validate the input tax credit claims during the assessment process.

• Provisional Acceptance:

  • If the claim is found to be valid, it is provisionally accepted, and the taxpayer is allowed to utilize the credit.

• Rectification in Case of Discrepancy:

  • In case of discrepancies, taxpayers may need to rectify the issues and provide additional documentation for claim validation.

• Audit and Reconciliation:

  • Input tax credit claims are subject to audit, and reconciliation may be required to ensure accuracy.

8. Accounts and Records:

• Maintenance of Records:

  • Taxpayers are required to maintain detailed records of their business transactions, including invoices, bills of supply, and all relevant financial documents.

• Retention Period:

  • Records must be retained for a specified period, usually six years from the end of the financial year.

• Electronic Records:

  • Electronic records are acceptable, and taxpayers can maintain records digitally as long as they comply with prescribed formats and standards.

• Availability for Inspection:

  • Records must be made available for inspection by tax authorities when required.

• Penalties for Non-Compliance:

  • Non-compliance with record-keeping requirements may result in penalties.

9. Assessment:

• Self-Assessment:

  • Taxpayers are required to self-assess their tax liability and file regular returns.

• Scrutiny Assessment:

  • Some returns may undergo scrutiny assessment by tax authorities to ensure accuracy.

• Notice for Assessment:

  • Tax authorities may issue a notice to taxpayers for assessment, requiring them to provide additional information or clarifications.

• Provisional Assessment:

  • In certain cases, provisional assessment may be conducted, allowing taxpayers to pay tax based on a provisional assessment while the final assessment is pending.

• Rectification of Errors:

  • Taxpayers have the opportunity to rectify errors during the assessment process.

10. Audit:

• Mandatory Audit:

  • Businesses with a specified turnover are subject to mandatory audit under GST.

• GST Audit Report:

  • The taxpayer is required to submit a GST audit report along with the audited financial statements.

• Auditor Appointment:

  • A qualified auditor, either a chartered accountant or a cost accountant, must conduct the audit.

• Verification of Compliance:

  • The audit aims to verify the compliance of the taxpayer with GST laws and regulations.

• Rectification of Discrepancies:

  • If discrepancies are found during the audit, the taxpayer may need to rectify them and comply with any recommendations made by the auditor.

11. Inspection:

• Authorized Inspection Officers:

  • Inspection may be conducted by authorized GST officers to verify the correctness of returns and compliance with GST laws.

• Prior Notice:

  • Generally, the taxpayer is given prior notice before inspection, allowing them to be present during the process.

• Inspection without Notice:

  • In certain circumstances, inspection without prior notice may be conducted, especially when there are reasons to believe that records may be tampered with.

• Access to Premises and Records:

  • Inspecting officers have the authority to access premises, examine records, and seize documents if required.

• Compliance Verification:

  • The purpose of inspection is to verify compliance, identify any irregularities, and ensure accuracy in record-keeping.

12. Offences and Penalties:

• Non-Payment of Tax:

  • Failure to pay tax or part thereof attracts penalties and interest.

• Issuing Incorrect Invoices:

  • Issuing incorrect invoices or maintaining false records leads to penalties.

• Failure to Deposit TDS:

  • Non-deposit of tax deducted at source (TDS) within the stipulated time results in penalties.

• Supplying Goods Without Invoice:

  • Supplying goods without a proper invoice attracts penalties.

• Obstructing Officer:

  • Obstructing a GST officer in the discharge of duties is considered an offence.

13. List of Offences and Their Penalties:

1. Failure to Obtain Registration (Section 122):

   • Penalty of up to 10% of the tax amount involved, subject to a minimum of Rs. 10,000.

2. Issuing Incorrect Invoices or Not Issuing Invoices (Section 122):

   • Penalty of up to Rs. 25,000.

3. Failure to Pay Tax Collected (Section 122):

   • Penalty of an amount equal to the tax not paid.

4. Submitting False Information (Section 122):

   • Penalty of up to Rs. 10,000 or an amount equivalent to the tax evaded, whichever is higher.

5. Obstructing Officers (Section 122):

   • Penalty of up to Rs. 10,000.

6. Contravention of Anti-Profiteering Provisions (Section 122):

   • Penalty of up to 10% of the profiteered amount.

7. Failure to Deposit TDS (Section 122):

   • Penalty of an amount equal to the tax not deposited.

8. Non-Compliance with TCS Provisions (Section 122):

   • Penalty of up to Rs. 25,000.

9. Contravention of Other Provisions (Section 122):

   • Penalty of up to Rs. 25,000.

10. Failure to Furnish Information (Section 122):

    • Penalty of up to Rs. 25,000.

14. Prosecution:

• Grounds for Prosecution:

  • Prosecution may be initiated for serious offences, including willful evasion of tax, fraud, and other intentional violations.

• Prosecution Procedure:

  • Prosecution is generally initiated through the issuance of a show-cause notice, allowing the taxpayer an opportunity to present their case.

• Penalties Upon Conviction:

  • Upon conviction, the taxpayer may face imprisonment and/or monetary penalties.

• Factors Considered for Prosecution:

  • Factors such as the amount of tax evaded, the nature and frequency of the offence, and the taxpayer's history may be considered.

• Legal Representation:

  • Taxpayers have the right to legal representation during prosecution proceedings.